The government is deciding whether it should build a veteran's hospital in an urban area. It will choose to build the hospital only if:
A) the hospital generates positive revenues.
B) the cost of building the hospital is low.
C) the profits from the hospital are positive.
D) the opportunity cost of building the hospital is zero.
E) the total benefits from the hospital exceed total costs.

Question

Quizplus · Accepted Answer

The best choice is for the government to only build the veteran's hospital if the total benefits from the hospital exceed total costs. This is because the decision to build a hospital should not solely depend on whether it generates positive revenues or profits. It should also consider the welfare and well-being of the veterans who will utilize the facility. Additionally, the cost of building the hospital should not be the only factor considered as it may not accurately reflect the long-term benefits and costs of building the hospital. Therefore, choosing option E ensures that the government makes a decision that maximizes social welfare.

The Government Is Deciding Whether It Should Build a Veteran's